Angola’s non-oil sector drives growth above regional average

14 February 2011

Lisbon, Portugal, 14 Feb – The Angolan economy is expected to see growth of over the regional average this year, benefiting from the recovery of oil prices, but mainly due to a return to investments in infrastructure and the remaining non-oil sector, according to Portuguese bank BPI.

In its latest report on prospects for the Angolan economy, BPI for 2011 expects economic growth of 6.9 percent, which is three times the level of growth posted last year, but below the most recent projections from the International Monetary Fund (IMF) and the government (7.6 percent).

The growth, “will be bolstered by a recovery of the non-oil sector,” which will benefit from “a boost to investment in key infrastructure, particularly by the private sector, which suffered some setbacks over the last few months,” said the analysts from BPI, which controls the main Angolan private bank, Banco Fomento Angola.

These setbacks were related to delays in payment by the State to some private companies, but also to a lower propensity to invest by foreign investors, the report said.

The non-oil sector is expected to see growth of 10 percent, thus gradually increasing its contribution to Angola’s GDP.

Based on average production of 1.9 million barrels of oil per day, above the 1.86 million of 2010, the oil sector is expected to grow by 2.2 percent, according to the same source.

“2011 is expected to be a year of consolidation of the economic recovery set out throughout 2010,” with “growth rates above average for the region,” with the non-oil sector affirming its positions as the “alternative engine for growth,” BPI said.

Economic acceleration is creating inflationary pressure and in 2010 inflation totalled 15.31 percent, which was above the target of 13 percent, and this year it is unlikely that the target of 12 percent will be met, according to the report.

“For that to happen it would be necessary, in a reduced period of time, to reduce dependence on imported goods and7or benefit from a more benign exchange rate scenario, overcome structural issues related to importing and processing goods at customs,” it said.

It should also be considered that during the year the government may reduce subsidies, as part of a “more disciplined fiscal policy,” which would have an impact on prices.

In terms of the budget, the best economic situation should have a positive impact, with a rise in revenues, mainly related to the oil sector, which accounts for 70 percent of the total.

In terms of expenditure, 2011 State Budget figures point to stabilisation, “reinforcing the idea that non-oil sector growth will be little dependent on public investment, but rather be centred just on priority projects, and more private investment,” BPI said.

The improvement in public accounts is expected to translate into a budget surplus of 2.0 percent, which according to the IMF may even reach 3.9 percent.

According to BPI, the Angolan authorities, “should continue to give priority to exchange rate stability,” throughout this year.

Foreign reserves have gradually recovered from their January 2010 low, and in December posted an increase of 40 percent compared to the beginning of the year and, in the next few months, foreign reserves are expected to be bolstered by foreign trade, BPI said.

“For this year the challenge facing the Angolan authorities consists of a fiscal policy that aims to promote balance in the non-oil sector budget, without affecting investment in infrastructures and manufacturing units,” it said.

At the same time, BPI said, Luanda will have to ensure, “accumulation of foreign reserves and the payment plan for debts to private foreign companies operating in the country,” for which it is counting on a favourable outlook for oil and economic growth in Asia and Latin America, where it sends 40 percent of its exports. (macauhub)